(Newser)
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Fannie Mae and Freddie Mac expect to pay roughly $210 million in retention bonuses over the next 18 months, reports the Wall Street Journal. Some 7,600 employees are slated to get bonuses, in some cases totaling as much as $1.5 million, in a program that has drawn sharp criticism in Washington. Federal Housing Finance Agency director James Lockhart told Charles Grassley about the payments in a letter made available to the Journal.

Barney Frank has called on Lockhart to end the payouts, saying he was “very skeptical” about rewarding the failed GSEs' staffs. But Lockhart defended the bonuses, $51 million of which have already been paid. “It is not realistic to expect that experienced and highly skilled employees will indefinitely continue to work as hard as they have if we do not provide reasonable incentives,” he wrote.

Also, if you deny bonuses across the board to everyone and not just those who truly made awful mistakes, you take away the very incentive to make the employee excel at what they are doing. With no incentive, they will work less efficiently going forward and contribute more to the economic malaise.

Robert_Dada

Apr 3, 2009 8:38 AM CDT

These aren't bonuses in the conventional sense (e.g. tied to firm profit). Financial institutions long ago began minimizing annual merit increases to salary and instead replaced it with bonus income as a means to control salary growth in the workforce (brought on by the compounding effect of annual merit salary increases year over year). Asking all employees to give up their bonus would be like me asking you to give back salary you had earned for the work you performed due to company performance. Executive compensation is a problem to be sure. But let's not victimize all employees due to the mistakes of the few at the top. Besides which, the majority of people in these firms receive some level of bonus income. Making them give it back makes them less able to contribute to the stimulus of the economy by further hampering their ability to spend. Again, I remind you, some of these people make 20-30,000 per year in salary. We're not talking about Wall Street elite.

Caps

Apr 3, 2009 8:21 AM CDT

I have worked most of my adult life. In order for us to get a bonus we had to make money for the company. Sometimes we got large bonus, then if the company profit was small, we got small bonus. Freddie and Fannie made no profit. o they expect a large bonus. Give us all a break, and forget about a bonus.